The New Retail Thread

I just went there for coffee a couple of days ago in DC. It was packed but worth the wait. The coffee is freshly made per order.
 
Dig Inn is opening in DTX (FrozenYo old location on Washington St.) and in the Pru Mall.
 
True. To a certain extent. It's not like the way Dunkns brews their coffee. Each drink is brewed and made from scratch separately to a point where I wouldn't be surprised if they picked the beans right in the back or flew them in on drones from Columbia per drink order. Either way the coffee tasted fantastic. Way better than Dunkns water and Starbuck's burnt beans.
 
guitarguynboston said:
True. To a certain extent. It's not like the way Dunkns brews their coffee. Each drink is brewed and made from scratch separately to a point where I wouldn't be surprised if they picked the beans right in the back or flew them in on drones from Columbia per drink order. Either way the coffee tasted fantastic. Way better than Dunkns water and Starbuck's burnt beans.
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I think most respectable coffeehouses produced a pretty good product. Even Starbucks isn't bad for what it is (you have to like that style of roasting). Dunkins, on the other hand...I never got the cachet of it here in New England. Why they even sell coffee is beyond me--they should stick to lousy doughnuts (which, let's face it, are still good for those moments--and you know when they are--that you crave deep-fried, sugary crap :)).
 
good that's right down the street from my office, however there's another one 5 mins away in Cambridge, I wish they open one in Dot where I live ;)
 
In case any of you are looking to dampen your mood this morning:

Bloomberg: Blame the Banks for All Those Boring Chain Stores Ruining Your City

Bloomberg said:
As far as landlords are concerned, restaurant chains and large retailers are safer bets than mom-and-pop stores, Perez says. The same thinking goes for banks lending to property buyers, who will generally extend better terms when a chain business such as a Gap or a Walgreens is on the lease.

Those dynamics have proven harder to resist in recent years as investors have bid commercial real estate to record prices and competition in marquee markets such as New York and San Francisco have sent buyers looking for bargains in smaller cities. These out-of-town investors, once they arrive in Cleveland, Nashville, or Milwaukee, have a tendency to rely on relationships with national brokers and large-chain tenants.

[...]

And it’s not just that the big chains can afford to pay more—they actually get to pay less than the local store. National retailers are often rewarded for their perceived credit worthiness with lower rents. For the same reason, landlords hoping to sell or refinance a building are more likely to sign those chains to satisfy a potential lender. The reason your favorite pizza place is now a Subway may be tied to perceived credit worthiness, the desire for refinancing, and satisfying lenders that call the shots.
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(emphasis mine)
 
^ Why no city program for some small number of affordable rent retail parcels designated for local/non-chain retailers? We do it for housing, let's do it for retail. It would make a nice offset from some of the big developers; even if it's just 1 out of ever 15 retail slots or something.
 
^ What gets me here is that this is not necessarily an issue of affordability or local retailers getting "priced out" of an area. And it's not an issue of credit worthiness or ability to pay. It's an issue of perceived credit worthiness and ability to pay to arbitrators who are removed from the details of the situation.

A local shop could have better financials and a better credit history than a chain store franchise, and be willing and able to pay higher rent than the chain, but it could still be denied a lease renewal because a banker on the other side of the country who might be making a loan to the landlord has never heard of it.

When chain stores are debated (as with the Starbucks in Southie, though that situation is slightly different) my point of view has typically been: "if you, the neighborhood, don't want the chains, then don't shop at them. Speak your voice with your dollars. If you shop at local shops and not at chains, the local shops will prosper and the chains will falter". What this article points out is that there is a disconnect between leasing behavior and the performance of the retailers. A successful local shop can be replaced with a less-successful chain based solely on national reputation, not local performance. And that is super disheartening...
 
Expected value.

If starbucks has a 90% chance of paying its $50/sq. foot over ten years and local coffee shop has a 80% chance of paying $55/sq. foot over ten years, starbucks wins.
 
choo said:
Expected value.

If starbucks has a 90% chance of paying its $50/sq. foot over ten years and local coffee shop has a 80% chance of paying $55/sq. foot over ten years, starbucks wins.
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But there's informational asymmetry here. The banks making the loan don't know the odds of Joe's Coffee paying $55/sf because they've never heard of Joe's Coffee. They have heard of Starbucks, however, and have made loans to 147 other firms with Starbucks in their portfolios. So they assume that Starbucks must be better, even if Joe's Coffee has been crushing it at that location since the Carter Administration.
 
JumboBuc said:
^ What gets me here is that this is not necessarily an issue of affordability or local retailers getting "priced out" of an area. And it's not an issue of credit worthiness or ability to pay. It's an issue of perceived credit worthiness and ability to pay to arbitrators who are removed from the details of the situation.
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I understand & agree; i meant not just for affordability but that those would be designated parcels for that purpose only. E.g., just as I can't buy one of those $300k artist condo's because I'm not a (real) artist, a chain physically couldn't go there. If the system is as broken as you & the article say, this could be a nice little piece of policy.
 
Choo has it right.

This is all about risk and one of the best defenses is diversification. Chains may seem like the opposite of diversification to the customers, but the lender/landlord gets geographical diversification. The Gap can pay rent in Harvard Square out of revenue collected in Natick or San Francisco or Tokyo.
 
fattony said:
Choo has it right.

This is all about risk and one of the best defenses is diversification. Chains may seem like the opposite of diversification to the customers, but the lender/landlord gets geographical diversification. The Gap can pay rent in Harvard Square out of revenue collected in Natick or San Francisco or Tokyo.
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That's not how franchises work.

And if a corporate-owned store is faltering, the owner will close it (see, for example: The Gap).
 
bigpicture7 said:
I understand & agree; i meant not just for affordability but that those would be designated parcels for that purpose only. E.g., just as I can't buy one of those $300k artist condo's because I'm not a (real) artist, a chain physically couldn't go there. If the system is as broken as you & the article say, this could be a nice little piece of policy.
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Cambridge has tried something like this - they have a limit on "fast-food" places in Kendall and other neighborhoods - but it has ended up catching places like Clover and has had the effect of really hurting the lunchtime retail environment. So obviously, like any policy, a lot of thought has to be put into the design...
 
JumboBuc said:
That's not how franchises work.

And if a corporate-owned store is faltering, the owner will close it.
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Fair point on franchise revenue transfer, though I don't think the corporation lets its franchisees run their business into the ground and declare bankruptcy, do they? I don't know for sure - do you? Who is left with responsibility for the lease if a franchise fails?

And a corporation closing a store doesn't mean the landlord gets stiffed. Mom and Pop closing (presumably in bankruptcy) does.
 
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